State Bank of India (SBI), the country's largest lender, has announced plans to promote the adoption of emission reduction technologies among corporates. The bank aims to provide better financing terms to companies that demonstrate strong environmental, social, and corporate governance (ESG) scores, according to Ashwini Kumar Tewari, the managing director (risk, compliance and stressed assets resolution group) at SBI. The announcement was made on Thursday.
Tewari clarified that while the bank does not currently require companies to have a net zero plan in place, it would eventually move towards this requirement. "We don't ask for net zero plan from the companies now. Ultimately, we will go to it. We will start conversation with the corporates and that process will start," he said during a banking conclave organized by CII.
'Net zero' emissions refer to achieving an overall balance between greenhouse gas (GHG) emissions produced and GHG emissions taken out of the atmosphere. This concept is increasingly becoming a key consideration for financial institutions worldwide as they seek to align their lending practices with broader sustainability goals.
Currently, SBI offers a 25 basis point concession on interest rates for electric vehicles as part of its efforts to encourage sustainable practices. This initiative is expected to be expanded in the future with better financing terms for corporates that demonstrate superior ESG performance.
Tewari also touched upon the challenges facing the banking industry, including competition from the growth of the equity market and Non-Banking Financial Companies (NBFCs). He emphasized that banks still remain a major source of funding for the country despite these challenges. "The banking sector needs to be shepherded. Unlike the NBFCs which can reach the last mile, banks have high cost of operations," he said.
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